Samsung announced that it would stop all operations in its last PC plant in China amid supply chain disruption due to the coronavirus pandemic.
It looks like Samsung Electronics Co. is the latest company to leave China. In a report published by Yonhap News agency, South Korea’s tech giant wants to permanently close its computer factory located in Suzhou, China, as a strategy to improve the efficiency of its supply chain management.
Samsung to shift production and supply chains
The closure is said to affect half of the factory’s 1,700 workers, according to the South China Morning Post. Those who work in research and development, however, will remain in post as the company shifts its focus on the said field. Information surrounding the plant’s revenue, shipments, and employees’ details were not shared in public as well.
There are too many speculations as to why Samsung suddenly decided to leave China, especially that it is not the first time this year.
Yet despite the rising tension between China and the U.S., hike in Chinese labor cost, and the damages caused by the pandemic, the company’s officials said that its move to shut the factory is part of its strategies to boost its production efficiency amid tight competition between tech companies.
The tech giant also assured that trade between Samsung and China will not be affected and will still “provide superior products and services” moving forward.
Samsung’s Suzhou factory began its operations in 2002 and since then produced laptops and desktops. And as per Reuters, the PC plant in 2012 has shipped an estimated US$4.3 billion [AU$5.97 billion] worth of products out of China but eventually dropped to $1 billion in 2018.
Last year, Samsung closed its last smartphone factory as well.
Japanese companies leaving China
Samsung leaving China due to the pandemic’s economic and manufacturing damages is not the first this year. Earlier in July, the Japanese government urged companies to cut their reliance on China and rather invest in Japanese and South-East Asia factories.
In return, the national government will pay them subsidies.
As per Japan’s Ministry of Economy, Trade and Industry, about fifty-seven companies involved in the deal—including facemask manufacturer Iris Ohyama Inc—will receive an estimated $536 million in subsidies to invest in Japanese factories. In a separate announcement, another set of 30 companies will also receive grants to invest in South East Asian countries.
Although it is unclear whether Japan’s move is politically influenced, Prime Minister Shinzo Abe has been planning to “reduce reliance” on any country—China, in this case—and diversify the production to ASEAN nations.
And with the coronavirus disrupting the supply chain, it appears to sever Japan’s economic ties with China.